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The Microcredit Summit Campaign, as part of its 6 Pathways, is helping to highlight ways that digital platforms are helping to expand financial inclusion, especially for the extreme poor. We are pleased to share with you this Executive Summary of their research.

At the 18th Microcredit Summit this research will be included in the breakout session “The Digital Revolution and Financial Inclusion.” We hope to see you there!

>> Authored by Jorge Moncayo and Marcos Reis.

Financial systems have a vital role in national economies. They provide savings, credit, payment, and risk management products to society. In this sense, inclusive financial systems — those with a high share of individuals and firms that use financial services — are especially likely to benefit poor people and other disadvantaged groups. On the contrary, poor people must rely on their limited savings to invest in their education or become entrepreneurs. In addition, small enterprises must rely on their limited earnings to pursue promising growth opportunities (Demirguc-Kunt and Klapper, 2012).

A female client from CRECER is managing her financial assets. Read the press release about CRECER’s Commitment, which focuses on women and movement above national poverty linePhoto courtesy of CRECER Bolivia

The Microcredit Summit Campaign welcomes CRECER Bolivia as the 53rd Campaign Commitment maker, joining a global coalition working to help 100 million families lift themselves out of extreme poverty. A press release was issued on the Campaign website. CRECER was one of some 200 attendees that visited the Commitment Café during the 17th Microcredit Summit in Mexico last September to write on the Commitment Wall. (Read more about that.)

In their Commitment, Crédito con Educación Rural (CRECER) commits to support the Campaign’s goal in the following ways:

Continue to prioritize services for female clients: CRECER has 152,000 clients and will grow 3 percent per year to reach 166,000 clients by the end of 2017 while maintaining a rate of 80 percent women clients.

Clients in rural areas: Maintain a rate of 56 percent of total clients living in rural areas.

Support cervical cancer prevention: By the end of 2015, 25 percent of female clients will be receiving preventive screening each year, and it is expected that approximately 32,000 will benefit from this screening by the end of 2015.

Improve the quality of life: Of CRECER’s 152,000 clients, at least 65 percent live on less than double Bolivia’s poverty line ($2 per person per day), which is to say they live on less than $4 per day per person, while 41 percent are below the national poverty line. Our goal is that 10 percent of clients who are currently below the national poverty line raise their incomes from less than $2 to at least $4 per day, thus surpassing the poverty line. This process will be monitored with the Progress out of Poverty Index (PPI).

José Auad, CEO of CRECER, explains why they have joined the Microcredit Summit Campaign and this global coalition:

“Being a part of the Campaign…coincides with CRECER’s institutional philosophy. We are mindful of the responsibility that this signifies, as well as the responsibility we take on through the Commitment, for our fight against poverty began more than 25 years ago. We focus on a very vulnerable population, such as women in rural areas who, while truly experiencing poverty, are heroines in their daily struggle. We are convinced that by joining efforts and taking action…, we will reach the great goal of helping 100 million families around the world.”

CRECER is a development financial institution that provides financial and educational services to low-income women in Peru, in order to improve their quality of life and their families. It was founded in 1999 and its mission is to provide excellence and warmth with integrated financial products development services to improve the quality of life preferably women and their families. Read CRECER’s Campaign Commitment letter.

The Microcredit Summit Campaign looks forward to welcoming our new partners to the global coalition and sharing their progress towards the Commitment achievement at the 18th Microcredit Summit. The Campaign’s 100 Million Project is building a movement among financial service stakeholders committed to helping to end extreme poverty through: public statements of commitment to action, expanding practices to reliably measure movement out of extreme poverty, and promoting innovations and best practices to accelerate movement out of poverty.

We invite you to join CRECER and…

Get Inspired. Set a Goal. Make a Commitment.

Join the movement to help 100 million families lift themselves out of extreme poverty:

As part of their 2014 Campaign Commitment, Carsey School of Public Policy co-hosted a learning event on Thursday, December 11th with us to share the value of starting and scaling up savings groups. William Maddocks (Carsey School of Public Policy) facilitated an engaging discussion, featuring Jong-Hyon Shin (Fundación Capital in the Dominican Republic), and Jeffrey Ashe (The Carsey School of Public Policy).

We would like to thank the panelists as well as the E-workshop attendees, especially those who participated to the Q&A session. We invite you to comment on this post to continue the discussion about savings groups and other breakthroughs financial inclusion. Please click on the links below to explore the session content.

A savings group replication agent trains a new group. She is using the all-oral curriculum which makes it possible for communities with low or no literacy levels to create and run a savings group with complete autonomy.

Summary of the E-Workshop

The E-workshop focused on two main issues:

A 2-hour training method to create new savings groups

The link between savings groups and conditional cash transfers.

Jong-Hyon presented her own experience in the Dominican Republic, and Jeff talked about the takeaways from his research in West Africa.

The live discussion with participants also touched on a wide range of topics, including the benefits and challenges of youth savings groups, the role of religious institutions in supporting the savings group movement, and the benefits of bank linkages for both the commercial banks and savings groups members. Check out the full recording of the session available here.

A youth savings group in Mali. Photo courtesy of Jeffrey Ashe.

Takeaways from the panelists

Without doubt, the groups trained by classical VSLA enjoy higher quality than the groups trained in 2 hours. There are 2-hour groups saving as much as the conventional groups, but it is true that the group quality is not even, while the conventional groups demonstrate rather consistent performance. 2-hour training can get the groups to start saving, but it’s not enough to build a strong group. I believe that a group should have at least 3-5 subsequent monitoring visits in its first cycle. This is why I am working with PROSOLI, Dominican Republic’s CCTs, in which the group members will have a periodic visits from their trainers. Another measure to complement 2-hour training is to pay attention to the selection of members. When the members are sufficiently interested, and there is a mutual trust within the group, chances for subsequent intervention drops dramatically. In sum, it is ideal to have groups trained by costly and labor intensive conventional methodology, but if we are to achieve the scale, simple training may not be an undesirable option.

Two and a half billion people worldwide need a better way to save and borrow. Savings groups provide an alternative, safe and convenient place to save and easy access to small loans; an approach to mitigating poverty that is uniquely scalable because it is based on catalyzing the capacity of people to mobilize their own resources with only transitory outside help. The cost: a dollar per person and trending downward as what is learned in one village spreads virally to neighboring villages. Within ten years, savings groups with 100 million members could improve the lot of the poor in a million villages, at a cost of less than one percent of what these countries will receive in foreign aid. The extraordinary growth, success and durability of savings groups are due to following these principles:

Start with a vision of scale and design for viral replication – multiple groups in thousands of villages in a single country

Less is more, and the simpler the better

Build on what is already in place

Be sustainable – 89% of groups worldwide are saving and lending without outside support

No giveaways – giveaways keep control in our hands, not theirs

Keep costs low – the problems of poverty are vast

Insist on local control, the key to building skills and lowering costs.

Embrace learning and innovation

Are savings groups the silver bullet for eradicating poverty? No development effort can deliver on that promise – but savings groups are perhaps the best and most practical place to begin. The strategy of savings groups is based on an awareness that good ideas spread as they always have: through talking with neighbors and helping one another. We will judge ourselves successful when development passes from our hands to theirs.

The map of the Savings for Change (SfC) program shows the rapid expansion of savings groups in Mali over the last 6 years. Red dots are groups 5-6 years, yellow is 3-4 years, and green are groups only 1-2 years old. SfC is a program run in partnership by Oxfam America and Freedom from Hunger.

E-Workshops are hosted by the 100 Million Project of the Microcredit Summit Campaign and strive to feature the work of organizations who have announced Campaign Commitments to take specific, measurable and time-bound actions that demonstrate their commitment to the end of extreme poverty.

Red Financiera Rural (RFR) is the leading microfinance network in Ecuador. RFR supports microfinance institutions that serve the most vulnerable members of society. Currently RFR works with 46 member organizations across Ecuador to design innovative products and solutions for clients of their member microfinance institutions. RFR promotes best practices in financial transparency and reporting social outcomes in the sector. RFR’s innovative program to set up Social Responsibility Systems among its member institutions earned it the distinction of being a finalist for the European Microfinance Award in 2008. It is this innovative and social drive that makes RFR a well-respected microfinance organization today.

“At RFR we have supported the Microcredit Summit Campaign since we were founded in 2000. We are very pleased that our member institutions contribute to the goal of reaching people living in poverty with financial services, especially the most vulnerable including women and farmers. And we are convinced that with the dedication of our 46 members, through continuous learning, development of new methodologies and efficient management at a social and financial level, we contribute every day to a greater number of Ecuadorians being able to move out of poverty on their own accord, being agents of their own development.” – Javier Vaca, Executive Director, Red Financiera Rural

Some key excerpts of Red Financiera Rural’s Campaign Commitment:

We will expand to include 3 more member institutions by the end of 2014.

In 2014, we will develop innovative microfinance products based on the results of the institution survey that addresses the needs of the clients and institutions. These needs include rural credit, credit with value chains, rural savings, microinsurance, and microfranchises.

By the end of 2014, we will increase the coverage of institutions participating in Finance Education Programs from 8 members serving 2,700 clients, to 12 members.

By the end of 2014, we will implement Social Performance Management tools in 20 institutions. Among these, we will implement 4 SPI, 2 Smart evaluations, and 2 with the Truelift tool.

By the end of 2014, we will implement these products in at least 8 institutions.

Congratulations to this week’s winner of the Raffle for Institutional Action Plan Submitters. Established in 2009, Fundación SERVIGUA is a private not-for-profit institution (according to the governmental decree 241-2009) that works with rural populations in the north and west of Guatemala, in … Continue reading →

Pro Mujer is a leading development organization that provides women in Latin America with financial, health and human development services that are typically out of reach, but essential to breaking the cycle of poverty. These services include:

Small loans, savings and insurance;

Business and empowerment training;

Preventive health education; and

High-quality, low-cost primary healthcare.

We deliver this holistic package of services in an integrated manner through communal banks, peer groups of approximately 20 women who guarantee one another’s loans, and in Pro Mujer centers across the region. With easy and convenient access to vital services in a safe and supportive environment, women gain the financial independence, knowledge and self-esteem they need to become agents of change at home and in their communities.

Founded in Bolivia in 1990, Pro Mujer also operates in Argentina, Mexico, Nicaragua and Peru and is headquartered in New York City. Over the past 22 years, Pro Mujer has disbursed more than US$1 billion in small loans and reached more than 1.6 million women and their 6.4 million children and family members. At the close of 1Q2012, Pro Mujer managed a loan portfolio of $101,338,000 and served more than 261,832 clients in 178 centers supported by 1,755 employees.

For more information, please visit www.promujer.org or join the conversation by subscribing to our blog or following us on Twitter. Pro Mujer is a 501(c)(3) tax-exempt, nonprofit organization.

Congratulations to this week’s winner of the Raffle for Institutional Action Plan Submitters, Fonkoze of Haiti!

Fonkoze is Haiti’s alternative bank for the organized poor. In fact, it is a family of three institutions working together shoulder-to-shoulder towards a single compelling mission: building the economic foundations for democracy in Haiti by providing the rural poor with the tools they need to lift themselves out of poverty. This mission is reflected in our name, Fonkoze, which is an acronym for the Haitian Creole phrase “Fondasyon Kole Zepòl” meaning “Shoulder-to-Shoulder Foundation.”

Fonkoze was founded in 1994 by 32 grassroots leaders led by Father Joseph Philippe, a Haitian priest and community organizer, as a way for rural cooperatives and market women to have access to financial services like savings and credit. Fonkoze has since grown from two volunteer employees to Haiti’s largest microfinance institution with over 900 employees and 46 branches serving over 60,000 loan clients and 250,000 savers.

How We Work

Nearly all of Fonkoze’s branches are located in small rural towns in every corner of Haiti. Our branches serve as full retail locations with teller windows for deposits/savings, money transfer services and currency exchange. Branches also function as the home bases of our staff who travel on motorbikes to meet with clients.

In our main microcredit program, clients form solidarity groups of five women who take out loans together. These groups are organized into ‘centers’ with 10 or more other groups that meet bi-monthly with Fonkoze staff to complete transactions, participate in education programs, receive training and support each other’s’ progress out of poverty.

The Poorest – Chemin Lavi Miyo

Chemin Lavi Miyo, or the Road to a Better Life, reaches the poorest of the poor in Haiti who aren’t yet ready for one of our regular loan programs. We target women-led households who have little or no assets, no children in school, no access to healthcare and often have unreliable access to food.

During the 18-month program a Fonkoze case manager visits CLM families weekly and provides the training and tools necessary for them to build income generating activities and take the first step out of poverty. CLM families receive the assets needed to start a business (animals or merchandise), materials to repair or reconstruct their home, a small cash stipend, a water filter and free healthcare. Successful CLM graduates are able to graduate into our smallest loan program and join other women in solidarity groups.

Fonkoze & Small Business

Fonkoze is in the process of a multi-year expansion of its Small & Medium Enterprise lending efforts. As Haiti continues to recover from the earthquake, we recognize the need of formal sector businesses to have access to loan capital to fulfill increasing demand and hire new workers. Fonkoze fills a need for funding in the ‘missing middle,’ the gap between microfinance and traditional commercial lending.

Innovation – MiCRO & Kore W

The hurricanes of 2008 and the devastating earthquake in 2010 left hundreds of thousands of Haitians with nothing. In addition to the overwhelming human toll, people lost their homes and business leaving them with nothing on which to rebuild a new life. We had clients who, over and over again, would build up their assets and make significant progress in our programs only to lose everything in the next natural disaster.

In 2011, Fonkoze & MercyCorps founded the Micro Catastrophe Risk Organization (MiCRO) to develop a risk transfer mechanism for our clients called Kore W, compensating Fonkoze’s clients when they lose merchandise or their home or place of business is damaged. The payout includes a loan cancellation, USD $125 and the opportunity to take out a brand new loan when the client is ready.

Congratulations to the first winner of the Raffle for Institutional Action Plan Submitters, Fundación delamujer of Colombia! Fundación delamujer: A National Propeller in Microfinance Development Throughout its 26 years of operation, Fundación delamujer has continually contributed to the development of … Continue reading →

The world is mobilizing to address the massive earthquake that hit Haiti on Tuesday, dealing a horrific blow to the poorest nation in the Western Hemisphere. The reported epicenter of the earthquake is a highly populated area known to house many of Port-au-Prince’s poorest families. The International Red Cross estimates that one-third of the island nation’s 9 million people have been displaced by the earthquake and many thousands are dead.

This disaster requires both immediate emergency relief and longer term rebuilding efforts. Microfinance will play a crucial role in the financing needs that inevitably arise from this type of catastrophe as Haitians look to rebuild their country.

Please Donate Today

Below are microfinance organizations participating directly in relief and recovery work among earthquake victims in Haiti. Click on the organization link below to donate:

Pro Mujer, a long time Microcredit Summit Campaign friend and council member, has launch a new blog. Their blog features first-hand accounts from clients, loan officers and medical staff, as well as news, relevant studies, upcoming events, and highlights from Pro Mujer volunteers. All entries are posted in English and Spanish.Please visit their new blog and learn about their great work in Latin America today!

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DISCLAIMER The views and opinions expressed on this blog are solely those of the original authors and other contributors. These views and opinions do not necessarily represent those of the Microcredit Summit Campaign and/or any/all contributors to this site.